TaxTMI 
TaxTMI 
2026 (9) TMI 513
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.... CCIT instead of PCIT, who has only the authority to pass the order without there being any show cause notice issued by the CCIT or any authority of law empowered by the CBDT to execute the work of PCIT. For this assessee has raised the following Additional Ground of Appeal: "On the facts and circumstances of the case, the order of 263 passed by PCIT-12, is bad in law and void ab initio as the has been passed by an officer of the rank of CCIT, stepping into the shoes of PCIT, without there being any show cause notice issued by CCIT or any authority of law or any directions / orders issued by CBDT empowering the CCIT to execute the work of PCIT-12." 3. Ld. Counsel for the assessee stated that the aforesaid additional ground of appeal is purely legal in nature and all the facts relating to this ground are available on record and no new facts are to be investigated for the adjudication of this additional ground. Ld. Counsel for the assessee stated that assessee can raise additional legal ground or even a fresh legal ground at any stage of the proceedings and for this he relied upon the decision of the Hon'ble Supreme Court in the case of CIT vs. Varas International 284 ITR....
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....re issued by the AO See Pg number 154-160 of PB 28.06.2023 Assessee filed another reply in pursuance to the questionnaire issued by the AO See page number161- 165 of the PB 20.09.2023 Another notice under section 142(1) of the Act has been issued to the assessee See page number 166- 169 of PB 03.01.2024 Another notice under section 142(1 ) of the Act has been issued to the assessee Page number 174-177 of PB 17 02 2023 Another notice under section -142(4) of-the Act has been issued to the assessee-Page number 182-184 of PB 05.03.2024 Another notice under section 142(1) of the Act has been issued to the assessee Page number 200-205 of PB 22.03.2024 Another notice under section 142(1) of the Act has been issued to the assessee Page number 215-218 of PB 28.03.2024 Assessment under section 143(3) has been framed Admitted fact 16.02.2026 Hon'ble ITAT has passed the order in the case of assessee with respect to AY 2020-21. The Hon'ble ITAT has decided the issue of notional ALV vis-à-vis all the properties held by assessee. Admitted fact copy of the ITAT order is. there in Paper Book from Page ....
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....wers under this section. However, in that case the notice must be issued by the authority in the capacity of CCIT and not in the capacity of PCIT. However, even an officer higher in hierarchy can perform the functions of a junior officer, provided there has to be some order of the CBDT u/s 120(2) of the Act:- Section 116 describe the various authorities under the Act and as per the provisions of section 116(b) Director General of Income Tax or Chief Commissioner of Income Tax are the synonyms for each other and interchangeable terms. However, the Principal Commissioner is not synonym of Chief Commissioner and the same is defined in section 116(c) which provides that Directors of Income Tax or Commissioner of Income Tax. Similarly, the definition clause of section 2 defines and distinguish Chief Commissioner and Commissioner. Section 2(15A) provides who will be chief commissioner and section 2(16) provides who will be the Commissioner of Income Tax. 10. As per the provisions of section 120(2) of the Act any other authority can exercise the powers of other provided there has to be some express order by the CBDT which order is not there in the present case. We also note th....
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.... that assumption of jurisdiction was bad for non- satisfaction of the condition precedent." 5. The Apex Court in the case of Anirudh Sinhji Karan Sinhji Jadeja Vs. State of Gujarat, (1995) 5 SCO 302 has held that If a statutory authority has been vested with Jurisdiction, he has to. exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether. 6. We are, therefore, of the opinion that the Tribunal has rightly decided the legal aspect, keeping in view well- established principles of law laid down in catena of judgments including that of the Supreme Court. 11. We further note that similar view has been taken by the Hon'ble Bombay High Court in the case of Ghanshyam K Khabrani Vs ACIT (2012) 346 ITR 443(Bom) wherein it has been observed Head Notes as under:- "6. The second ground upon which the reopening is sought to be challenged is that the mandatory requirement of s. 151(2) has not been fulfilled. Sec. 151 requires a sanction to be taken for the issuance of a notice under s. 148 in certain cases. ....
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....sed by that authority and the satisfaction which the statute mandates of a distinct authority cannot be substituted by the satisfaction of another. We are in respectful with the judgement of the Delhi High Court." 12. In terms of above factual matrix and keeping in view the aforesaid legal position explained, the impugned notice is without jurisdiction and thus bad in law and also its consequent revisional order of the PCIT is not sustainable in the eyes of law, hence, the same is quashed on this legal issue and accordingly, the additional ground raised by the assessee is allowed in the manner as aforesaid. 13. Coming on the merits of the case, it is noted that assessee is an individual and a designated Senior Advocate. Assessee is primarily practicing before the Supreme Court of India and various High Courts, all over the country. The assessee has also served Union of India as Attorney General. The return of the assessee was selected for scrutiny and assessment under section 143(3) of the Act has been framed by the Assessing Officer vide order dated 28.03.2024. Assessing Officer made a disallowance of Rs. 1,76,30,842/- u/s. 14A read with rule 8D of the Act. Against the addit....
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....revenue that the assessee has masked some income or properties from revenue, due to which there is a loss to Revenue, then there are other remedy in law. Because it is settled position of law that PCIT cannot enlarge the scope of assessment 16. It is submitted that in Para 5.1 at internal page number-4 of the show cause notice (running page number 42 of the appeal memo) the PCIT has observed that for one of the property at London the assessee has not shown any ALV, despite the fact that the assessee has shown ALV in immediately previous years. In this regard it is submitted that the property was acquired on 16.08.2019, that is relevant to AY 2020-21. In that year the assessee has offered an amount of Rs 3.50 lakhs as ALV attributable to this property. And in next AY 2021-22 the assessee has also offered the ALV at Rs 6 lakhs. In AY 2020-21 and AY2021-22, the assessee was sole owner and thereafter the assessee distributed shares of this property in favour of his wife and sons. It is the allegation of the PCIT that during year under consideration the assessee has not offered any ALV, and hence order of the AO is not correct. In this regard it is submitted that : a. In the....
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....d by the assessee to his wife by way of gift and as per the provisions of 64(1)(iv) read with 27(i) of the Act the ALV of this property is to be assessed in the hands of assessee. The PCIT has also commented that even the wife has not shown any ALV from this property. It is submitted that both assesses and his wife are in same tax bracket therefore clubbing provisions would not apply. Further the wife of the assessee is also a practising advocate and hence she could not show any income from this property as she was having officer here. The other properties discussed by the PCIT in Para 5.8 and 5.9 have already been held to be occupied professionally by the ITAT(see page number- 242 of PB- internal page 15 of the ITAT order). 19. It is further submitted that while passing the order u/s 263 of the Act, the PCIT has alleged that before the AO the assessess has submitted list of only few premises used by him for carrying out the profession. And the AO failed to take necessary action with respect to the other properties. In this regard it is submitted that the list of the properties submitted by assesses before the AO is of those properties which are exclusively used by assessee for ....
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....would have been considered by the PCIT before assuming jurisdiction of 263 of the Act. 22. It is submitted that this submission along with supportive evidences has been duly submitted with AO and then the AO has taken a plausible view. The assessee also submitted before the PCIT regarding the non-applicability of provisions of ALV and provisions of section 22 of the Act. However, the PCIT without refuting the averments made and without conducting any enquiry on his own has held that order of the AO is erroneous and prejudicial to the interest of revenue. The PCIT has taken the shelter of explanation -2 of section 263 of the Act. It is submitted that the coordinate Bench of the ITAT in the case of D.K. Associates in ITA number 5659/Mum/2016 dated 16.01.2017 has thread barely examined the applicability of explanation 2 of section 263 of the Act and has held that the PCIT cannot go away by simply relying on explanation 2 and it is the duty of the PCIT to conduct necessary enquiries on his own before declaring the order of the AO erroneous. Relevant observations of the Bench are as under: - 10.4 We have examined Explanation 2 to section 263 which is inserted by the Finance ....
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....o the interest of the Revenue 23. It is further submitted that coordinate bench of the ITAT, in assessee's own case in ITA Number -2427/Del/2025 vide order dated 16.02.2026 has also held that the assessee is not liable to pay any tax on account of notional ALV vis-à-vis such properties from where the assessee has carried out the profession. In view of above, Ld. AR has submitted that addition in dispute may be deleted. 24. On the other hand, Ld. CIT-DR relied upon the order of the PCIT. 25. We have heard the rival contentions and gone through the facts of the present case on merit as well. In the instant assessment year 2022-23, the assessee filed his return of income under section 139(1) of the Act on 07.11.2022 declaring total income of Rs. 161,60,86,270/-. The case of the assessee was selected for scrutiny, and the assessment was completed u/s. 143(3) read with section 144B of the Act vide order dated 28.3.2024 wherein the Assessing Officer examined the list of properties and ALV and after due inquiry and verification of records, he accepted the assessee's position that the properties were used for business purposes. Subsequently, the PCIT issued a show cause not....
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....s financial years, the assessee had voluntarily offered income from house property for these properties. In respect of properties gifted, the assessee was no longer owner and thus no ALV was attributable or assessable in the hands of the assessee. 27. Out of total 11 properties, 3 properties are simple plots for which there can be no ALV. For the property of Noida there is no quarrel between the assessee and the revenue as the assessee has already offered the legitimate ALV. 28. So far as other properties are concerned - property at Goa, properties at London, property at Mukteshwar, Dubai and Sunder Nagar, have been dealt by the ITAT in previous year. It is observed that PCIT has gone to some other properties related to the family member of the assessee, ignoring that the assessee was not owner of these properties in law. So far as the properties disclosed by assessee in AL Sch. there cannot be any second opinion. Hence the view of the A.O is justifiable. It is noted that PCIT has observed that for one of the property at London the assessee has not shown any ALV, despite the fact that the assessee has shown ALV in immediately previous years. However, it is noted that the prop....
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....AO failed to take necessary action with respect to the other properties, in this regard it is noted that the list of the properties submitted by assesses before the AO is of those properties which are exclusively used by assessee for his profession. The other properties are in the name of spouse and children which they have shown in their respective returns. They are also professionals and carrying out profession independently from these properties. 29. On the issue of notional ALV, the assessee has utilised his office situated at Muktasehwar farm house during covid -19 period and income accrues to assessee via those matters have been duly offered for taxation. The case of the assessee is squarely falls under the provisions of section 22 of the Act which provides that no ALV is required to be offered if the property is used for carrying on the profession. Further the growth in professional receipt of the assessee would prove beyond doubt that the assessee is utilising the properties for his professional works. It is noted that profit margin of the assessee is very meagre and the assessee is paying maximum tax out of his professional receipt. This aspect would have been considere....
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....ssessee has not shown any ALV. Since this property has been fully utilized for professional purposes and professional income attributable to Tribunal this property has been offered for taxation. Further there is substantial increase in professional receipts of the assessee which would justify the view of the Assessing Officer and it reveals that professional receipt of the assessee has been increased from Rs. 167 crore to Rs. 187 crore. Respectfully, following the aforesaid precedent in assessee's own case, we hold that once the property is utilized for commercial purposes, the same cannot be accounted for the purpose of ALV. In terms of above, we hold that Assessing Officer was correct. (2) Flat No. 20 Hirst Court London, Serial No. 8 of AL Schedule We note that similar property/issue has been dealt by the Tribunal vide its order dated 16.2.2025 in ITA No. 2427/Del/2025 (AY 2020-21) by holding as under:- "13. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee before the Assessing Officer during the course of original assessment proceedings categorically stated that this property is exclusi....
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....has not given any finding how the assessment order is erroneous insofar as it is prejudicial to the interest of the Revenue. Once the details are available before the Assessing Officer, he has formed an opinion taking a view that the ALV declared by the assessee is in terms of provisions of Section 23(1) of the Act. 20. On the other hand, learned CIT-DR heavily relied on the revision order and stated that the Assessing Officer can verify the fair market rent and therefore, reassess the ALV accordingly. 21. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee has disclosed ALV of Goa Flat at Rs. 1.20 lakhs and this is assessed from assessment year 2011-12 and even in assessment year 2019-20, the ALV was accepted. This has been consistently declared by the assessee and accepted by the Revenue. Further, it is to be mentioned that the PCIT has not given any basis and how this ALV is not correct and without that, the order of the Assessing Officer cannot be treated as erroneous insofar as it is prejudicial to the interest of the Revenue. In terms of the above, we are of the view that the Assessing Officer ....
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....of the Assessing Officer is erroneous insofar as it is prejudicial to the interest of the Revenue in terms of Explanation 2(a) to Section 263 of the Act. 26. Learned Counsel for the assessee stated that this property is being assessed regularly and assessee is declaring the ALV of this property at Rs. 8,53,074/- and the same was accepted in the earlier assessment years. Learned Counsel for the assessee stated that the PCIT has not given any finding what is the value and what is the fair market rent of this property. The details were already filed by the assessee before the Assessing Officer and the Assessing Officer, after noting all these facts, has not touched the ALV of this property. Learned Counsel further stated that the PCIT has not given any finding how the assessment order is erroneous insofar as it is prejudicial to the interest of the Revenue. Once the details are available before the Assessing Officer, he has formed an opinion taking a view that the ALV declared by the assessee is in terms of provisions of Section 23(1) of the Act. 27. On the other hand, learned CIT-DR relied on the revision order and stated that the Assessing Officer has simply accept....
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....nnum, which is extremely low ALV on deemed basis. According to the PCIT, the Assessing Officer has not carried out any enquiry and therefore, this issue on which verification or enquiry has not been conducted by the Assessing Officer, the assessment order becomes erroneous insofar as it is prejudicial to the interest of the Revenue in terms of Explanation 2(a) to Section 263 of the Act. 30. Learned Counsel for the assessee stated that this property is being assessed regularly and assessee is declaring the ALV of this property at Rs. 1,20,000/- and the same was accepted in the earlier assessment years. Learned Counsel for the assessee stated that the PCIT has not given any finding what is the value and what is the fair market rent of this property. The details were already filed by the assessee before the Assessing Officer and the Assessing Officer, after noting all these facts, has not touched the ALV of this property. Learned Counsel further stated that the PCIT has not given any finding how the assessment order is erroneous insofar as it is prejudicial to the interest of the Revenue. Once the details are available before the Assessing Officer, he has formed an o....
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.... possible views which is adopted by the Assessing Officer is correct. (6) Property at Noida serial no. 9 of the AL Schedule. In this property there is no quarrel on this issue as the assessee has duly disclosed the ALV by way of actual rent received. (7) Property at Dubai Serial No. 10 of AL Schedule. This property was not there in the previous year. However, the ITAT principally, accepted the contention of the assessee, in previous year that if property has been used for carrying out profession then no ALV is required to be offered in terms of section 22. It is pertinent to mention here that assessee is using this Dubai property for carrying conferences in winters holidays of Supreme Court. Assessee has also shown substantial professional receipts attributable to this property. Further the ITAT in previous year has categorically held no ALV is applicable to such properties which are commercially used and once the property is commercially used, the same cannot be accounted for the purpose of ALV. Therefore, it is a case where the Assessing Officer has taken a view based upon a binding opinion and not unsustainable opinion. (8) Property in AL Schedule at S....